Instead of Helping Californians with Mental Illness, Local Agencies Have Sat on $2.5 Billion

Mental illness is a major concern in California. According to 2015-16 data from the federal Health and Human Services Department cited by the audit, 17 percent of California adults—or nearly 5 million people have mental health needs. About 4 percent of those suffer from serious mental illness. Photo: Thinkstock

California’s county and local mental health agencies have failed to spend $2.5 billion in taxpayer money that is intended to help Californians with mental illness, according to a new state auditor’s report.

Instead, the agencies have sat on the money, accumulating $80 million in interest as of fiscal year 2015-16, according to the report, released Tuesday.

The money comes from the Mental Health Services Act, approved by voters in 2004 to expand programs at the local level for all who suffer from mental illness or are at risk for mental illness. Funding comes from a 1 percent income tax on people earning $1 million or more.

In 2015-16 alone, the tax generated $1.5 billion for 59 county and local mental health agencies in California.

State Auditor Elaine M. Howle said in the report that the California Department of “Health Care Services’ poor oversight of the MHSA program is troubling given the importance of providing mental health services to Californians.”

County and local mental health agencies can use the funding for community services, prevention, early intervention, innovation, workforce education, training, capital facilities and information technology.

Of the $2.5 billion excess in local coffers, $231 million of it is due back to the state for reallocation because it has been unused for too long, the California Department of Health Care Services said in response to the audit. The Health Care department oversees the funding and local mental health programs.

Katharine Weir, a spokeswoman for the agency, said in an email that state law gives counties three to 10 years to decide how to spend their funds from the Mental Health Services Act depending on what the money will be used for.

As of now, counties and local mental health agencies have the right to keep most of the unused funds because they are within the time limits, she said.

But the auditor’s report said the state Department of Health Care Services has not given adequate direction on how to spend the funds or developed a process of how to recover unused funds and redirect them to other local mental health agencies that need them.

Moreover, the report said the state agency has not enforced financial reporting deadlines. Only one of 59 local agencies submitted its fiscal year 2015-16 annual report on time. State law requires the agencies to submit annual reports detailing the revenues they received from the Mental Health Services Act, their expenditures and the interest earned.

Mental illness is a major concern in California. According to 2015-16 data from the federal Health and Human Services Department cited by the audit, 17 percent of California adults—or nearly 5 million people have mental health needs. About 4 percent of those suffer from serious mental illness.

The unspent funds are especially concerning to those who advocate for Californians of color, as well as those with limited English fluency. These residents already have a hard time accessing the state’s mental health services because of stigma, language barriers, lack of insurance and other factors, said Kiran Savage-Sangwan, health integration policy director for the California Pan-Ethnic Health Network.

“We would urge the state to work with counties to make sure those resources are utilized to close gaps and reduce disparities,” she said.

Deborah Anderluh, communications director for the Steinberg Institute, a mental health advocacy nonprofit, said the audit is a step in the right direction.

“These reserves have gotten too big and the counties need guidance,” she said. “We’re looking forward to that strong state leadership, that stepping forward to provide guidance on prudent reserves and interest and holding deadlines for fiscal reports.”

She emphasized that the Mental Health Service Act has helped tens of thousands of people and has done much to expand existing services. But she hates that so much money is sitting unused.

“There’s so much unmet need,” Anderluh said.

In the bigger picture, 14 years after the Mental Health Services Act was approved, mental health still remains an “under-attended issue,” Anderluh said. “The only way to reverse that is by a very strong vision, leadership and guidance at the state level all the way down to the local level.”

The auditor’s report recommended that the Department of Health Care Services implement policies to redistribute any unspent funds to other local mental health agencies and to regularly analyze fund balances to watch for overly high reserves.

But the agency isn’t ready to take back and redistribute the $231 million due back now because it hasn’t formally adopted regulations governing the process, Weir said. The department expects to have those regulations done by January 2019.

The report also criticized the Health Care department for not being sure why it had a $225 million balance in its coffers. The audit claims the agency didn’t know whether the money was due to mental health agencies or was an accounting error.

Weir said the $225 million unaccounted fund balance is a “local assistance appropriation” allocated in 2012.

“An appropriation represents authority to spend money and does not represent actual cash available to spend,” she said in the email. “The Department of Finance has since worked with the State Controller’s Office to remove that $225 million appropriation.”